Averbach v. Rival Mfg. Co.
| Decision Date | 17 August 1989 |
| Docket Number | No. 88-1957,88-1957 |
| Citation | 879 F.2d 1196 |
| Parties | Sylvia AVERBACH, Appellant, v. RIVAL MANUFACTURING COMPANY. |
| Court | U.S. Court of Appeals — Third Circuit |
John J. O'Brien, III (argued), Philadelphia, Pa., for appellant.
Robert B. Mulhern, Jr. (argued), and William T. Campbell, Jr., Swartz, Campbell & Detweiler, Philadelphia, Pa., for appellee.
Before SEITZ *, SLOVITER, and GREENBERG, Circuit Judges.
Appellant, Sylvia Averbach, brought this suit alleging that appellee, Rival Manufacturing Company, had committed common law fraud in filing false answers to interrogatories in a prior product liability action between the parties which Averbach lost. The district court in this case entered a judgment notwithstanding the verdict for Rival following the jury's responses to special interrogatories in a bifurcated trial. The principal issue before us is whether the jury could properly have found that Averbach relied on Rival's answers to interrogatories in the prior action.
In 1977, Averbach suffered a fire in her home which she claimed was caused by an electric can opener with a design defect that allegedly caused continuous running, overheating, and ignition of the appliance. The can opener was manufactured by Rival. Averbach filed a product liability suit against Rival in the District Court for the Eastern District of Pennsylvania, alleging more than $200,000 in damages and invoking that court's diversity jurisdiction. One of the interrogatories propounded by Averbach to Rival read:
40. If the defendant has within the past five years received any complaints of an occurrence similar to those allegedly experienced by the plaintiff, please state for each such complaint:
(a) Its date;
(b) Its substance, including a description of the factual circumstances;
(c) The name and address of the person making the complaint.
Rival's response was:
40. a. December 7, 1976.
b. The claim was for property damage to a house. It was alleged that a Rival Model 731/1 Can Opener/Knife Sharpener caused a fire. The evidence did not support the claimant's allegations, the claim was denied by the Company and dropped by the Claimant.
The case was tried before a jury, which returned a verdict in favor of Rival in June 1981, from which Averbach did not appeal.
In September 1984, Averbach filed a motion for a new trial under Fed.R.Civ.P. 60(b) on the ground that she had recently received information showing that Rival falsely answered her Interrogatory Question No. 40, referring to records of the Consumer Product Safety Commission (CPSC) with respect to numerous complaints about fires caused by Rival's can openers during the period specified in the interrogatory. The district court denied the motion because it was not filed within one year after judgment as required for motions for new trial under Fed.R.Civ.P. 60(b)(3) based on fraud or misrepresentation, and this court affirmed by judgment order.
In May 1985, Averbach filed a two-count complaint against Rival in the Eastern District of Pennsylvania, this suit based on the allegedly false answer to the interrogatory in the product liability lawsuit. Count One was based on the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Sec. 1961 et seq., and Count Two on common law fraud. The district court dismissed the complaint for failure to state claims upon which relief could be granted. On appeal, this court affirmed the dismissal of the RICO claim, holding that Averbach could not claim that the court system was an enterprise for purposes of RICO because the court personnel and litigants lacked a common purpose. However, we reversed the dismissal of the common law fraud claim, concluding that Averbach's complaint sufficiently stated a cause of action. Averbach v. Rival Mfg. Co., 809 F.2d 1016, 1018-20 (3d Cir.), cert. denied, 482 U.S. 915, 107 S.Ct. 3187, 96 L.Ed.2d 675 (1987) and 484 U.S. 822, 108 S.Ct. 83, 98 L.Ed.2d 45 (1987). As we noted, "[i]f the information from the files of the [CPSC] about fires begun by Rival electric can openers is true, the answers to interrogatories served in the underlying action are grossly false." Id. at 1018.
With respect to the district court's conclusion that the complaint failed to allege justifiable reliance as required under Pennsylvania law, we found "unpersuasive the proposition that the complaint was deficient in failing to allege the self-evident purpose of asking for information under penalty of false swearing in the course of discovery, or the self-evident purpose of responding to a request for such information." Id. at 1020 (emphasis added). We remanded the case to the district court with instructions to proceed on the common law fraud count, which had an independent jurisdictional basis in diversity of citizenship.
Over Averbach's objection, the district court agreed to Rival's proposal to try the case by means of a bifurcated trial, with the first phase directed only to the question of whether the interrogatory responses were fraudulent, and the second phase to the issues of causation and damages. We note that this division is not along the common line of bifurcation between liability and damages. Nonetheless, Fed.R.Civ.P. 42(b) expressly authorizes a separate trial of any separate issue under certain circumstances, subject to Seventh Amendment considerations.
The court advised the jury that the trial would be divided into two phases, saying: App. at 749. 1
At trial, Averbach presented evidence by way of a stipulation of uncontested facts of the occurrence of the fire, Averbach's earlier suit against Rival, Averbach's propounding of the relevant interrogatories to Rival and Rival's answer identifying only one complaint. The stipulation also stated that App. at 616.
Averbach presented four live witnesses: Frank Kensill, an electrical contractor who reviewed the complaints received by Rival and the CPSC and who testified as an expert that, in light thereof, Rival's answers to Averbach's interrogatories "were false and purposely misleading," App. at 823; John Fred Jesse, an engineer employed by Rival, who had authored a memorandum in March 1979 reporting with respect to Rival's can opener products that "[n]umerous burn outs have been observed," App. at 1010; Gerald Waleski, another Rival employee, who had prepared Rival's answers to the interrogatories; and former state Judge Paul Chalfin, who had been hired as an expert witness for Rival and who had testified in deposition that Rival's answers were not dishonest or fraudulent. None of Averbach's witnesses testified or was in a position to testify that plaintiff relied on the false answers to the interrogatories in preparing the product liability suit for trial.
Rival's defense at trial focused on its contention that its answers to interrogatories were truthful because they were directed only to the specific model can opener in Averbach's home, and did not encompass its numerous other models. Rival called Charles G. Young, III, an attorney, who testified about discovery procedures and gave his opinion that Rival's answer to Interrogatory No. 40 was truthful. Young explained that answers to interrogatories are sworn statements and that App. at 1167-68. On cross-examination, Young acknowledged that he presumed all sworn answers to discovery requests to be true.
Rival made two motions for a directed verdict on the ground that Averbach had failed to prove all elements of fraud including reliance, but the motions were denied by the court. The court instructed the jury on the elements of common law fraud under Pennsylvania law, and, with respect to reliance, charged that the jury must find "that the Defendant intended that the Plaintiff rely on the Defendant's misrepresentation and ... that the Plaintiff did rely on the Plaintiff's misrepresentation." App. at 1243.
The jury responded affirmatively to each of the following special interrogatories:
1. Do you find that plaintiff, Sylvia Averbach, has proven by clear and convincing evidence that the defendant, Rival Manufacturing Company, made a misrepresentation of fact in answering interrogatories during discovery in the 1981 products liability action?
* * *
2. Do you find that the plaintiff, Sylvia Averbach, has proven by clear and convincing evidence that the misrepresentation uttered by the defendant, Rival Manufacturing Company, was fraudulent?
* * *
3. Do you find that plaintiff, Sylvia Averbach, has proven by clear and convincing evidence that the misrepresentation uttered by defendant, Rival Manufacturing, concerned a material fact?
* * *
4. Do you find that the plaintiff, Sylvia Averbach, has proven by clear...
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